Hain Celestial: Q3 Fiscal Year 2019 Financial Results

Lake Success / NY. (hc) The Hain Celestial Group Inc., a leading organic and natural products company with operations in North America, Europe and India providing consumers with A Healthier Way of Life, reported financial results for the third quarter ended March 31, 2019. The results contained herein are presented with the Hain Pure Protein operating segment being treated as a discontinued operation.

«We are encouraged by our third quarter financial results that demonstrate sequential performance improvements in many key areas of our business, and we are on track to achieve our fiscal year 2019 outlook,» commented Mark L. Schiller, Hain Celestial’s President and Chief Executive Officer. «Our team is in the early innings of executing on our transformational strategic plan to simplify our portfolio, strengthen our core capabilities, reinvigorate profitable top-line growth, and expand margins, return-on-invested-capital and cash flow. We remain committed to delivering consistency in our operational and financial results to drive long-term shareholder value.»

Financial Highlights(1)

Summary of Third Quarter Results from Continuing Operations(2)

Net sales decreased 5 percent to USD 599.8 million compared to the prior year period.

Net sales decreased 2 percent on a constant currency basis compared to the prior year period.

When adjusted for Foreign Exchange and Acquisitions, Divestitures and certain other items, including the Project Terra Stock Keeping Unit (SKU) rationalization(3), net sales were flat compared to the prior year period.

Gross margin of 20.9 percent, a 10 basis point decrease over the prior year period and a 130 basis point increase from the second quarter of fiscal 2019.

Adjusted gross margin of 21.6 percent, a 140 basis point decrease over the prior year period and a 130 basis point increase from the second quarter of fiscal 2019.

Operating income of USD 23.9 million compared to USD 29.3 million in the prior year period and an operating loss of USD 15.4 million in the second quarter of fiscal 2019.

Adjusted operating income of USD 38.9 million compared to USD 56.0 million in the prior year period and USD 29.9 million in the second quarter of fiscal 2019.

Net income of USD 10.1 million compared to USD 25.2 million in the prior year period and a net loss of USD 29.3 millionin the second quarter of fiscal 2019.

Adjusted net income of USD 21.7 million compared to USD 38.6 million in prior year period and USD 15.0 million in the second quarter of fiscal 2019.

Ebitda of USD 41.5 million compared to USD 51.5 million in the prior year period and USD 19.2 million in the second quarter of fiscal 2019.

Ebitda margin of 6.9 percent, a 120 basis point decrease compared to the prior year period and 360 basis point increase from the second quarter of fiscal 2019.

Adjusted Ebitda of USD 55.5 million compared to USD 73.4 million in the prior year period and USD 44.9 million in the second quarter of fiscal 2019.

Adjusted Ebitda margin of 9.3 percent, a 230 basis point decrease compared to the prior year period and a 160 basis point increase from the second quarter of fiscal 2019.

EPS of USD 0.10 compared to USD 0.24 in the prior year period and a loss per diluted share of USD 0.28 in the second quarter of fiscal 2019.

Adjusted EPS of USD 0.21 compared to USD 0.37 in the prior year period and USD 0.14 in the second quarter of fiscal 2019.

Segment Highlights from Continuing Operations

Hain Celestial United States

Hain Celestial United States third quarter net sales of USD 266.4 million decreased 5 percent over the prior year period. When adjusted for Acquisitions, Divestitures and certain other items including the Project Terra SKU rationalization(3), net sales decreased 2 percent over the prior year period. Segment operating income in the third quarter was USD 17.1 million, a 32 percent decrease from the prior year period and a 138 percent increase from the second quarter of fiscal 2019. Adjusted operating income was USD 21.8 million, a 39 percent decrease over the prior year period and a 62 percent increase from the second quarter of fiscal 2019. Segment Ebitda in the third quarter was USD 20.9 million, a 33 percent decrease from the prior year period and 70 percent increase from the second quarter of fiscal 2019. Adjusted Ebitda was USD 25.5 million, a 48 percent increase from the second quarter of 2019 and a 36 percent decrease over the prior year period.

Hain Celestial United Kingdom

Hain Celestial United Kingdom third quarter net sales of USD 227.2 million decreased 5 percent over the prior year period. When adjusted for Foreign Exchange, Acquisitions and Divestitures and certain other items(3) net sales increased 3 percent over the prior year period. The net sales increase compared to the prior year period was driven by 5 percent growth from Tilda® and 2 percent growth from Ella’s Kitchen®, or 11 percent and 9 percent growth, respectively, after adjusting for Foreign Exchange, Acquisitions and Divestitures and certain other items(3). The results for the United Kingdom segment compared to the prior year period also reflected an 8 percent decline in Hain Daniels, or 1 percent after adjusting for Foreign Exchange, Acquisitions and Divestitures and certain other items(3), primarily driven by declines from the New Covent Garden Soup Co.®, Cully + Sully®, and Johnson’s Juice Co.™ brands and private label sales, offset in part by growth in the Linda McCartney® and Hartley’s® brands. Segment operating income was USD 18.1 million, a 31 percent increase over the prior year period and a 24 percent increase from the second quarter of fiscal 2019. Adjusted operating income was USD 19.1 million, a decrease of 8 percent over the prior year period and a 6 percent increase from the second quarter of fiscal 2019. Segment Ebitda in the third quarter was USD 25.8 million, a 7 percent increase from the prior year period and an 18 percent increase from the second quarter of fiscal 2019. Adjusted Ebitda was USD 26.7 million, a 6 percent decrease over the prior year period and 6 percent increase from the second quarter of 2019.

Rest of World

Rest of World third quarter net sales of USD 106.1 million decreased 6 percent over the prior year period. When adjusted for Foreign Exchange, Acquisitions and Divestitures and certain other items(3) net sales increased 1 percent over the prior year period. Net sales for Hain Celestial Canada decreased 6 percent, or increased 2 percent compared to the prior year period after adjusting for Foreign Exchange, Acquisitions and Divestitures and certain other items(3), primarily driven by growth from the Sensible Portions® and Yves Veggie Cuisine® brands, offset in part by declines from the Europe’s Best®, Live Clean® and Dream® brands. Net sales for Hain Celestial Europe decreased 4 percent, or increased 4 percent on a constant currency basis, primarily driven by strong performance from the Joya® and Natumi® brands and private label sales, offset in part by declines from the Lima®, Danival® and Dream® brands. Net sales for Hain Ventures, formerly known as Cultivate Ventures, decreased 16 percent, or 14 percent after adjusting for Acquisitions and Divestitures and certain other items(3), primarily driven by declines from the BluePrint®, DeBoles® and SunSpire® brands, offset in part by growth from the GG UniqueFiber™ brand. Segment operating income in the third quarter was USD 10.9 million, a 2 percent decrease over the prior year period and a 30 percent increase from the second quarter of fiscal 2019. Adjusted operating income was USD 11.3 million, an 8 percent decrease over the prior year period and a 21 percent increase from the second quarter of fiscal 2019. Segment Ebitda in the third quarter was USD 14.0 million, a 2 percent increase from the prior year period and a 21 percent increase from the second quarter of fiscal 2019. Adjusted Ebitda was USD 14.4 million, a 4 percent decrease over the prior year period and a 17 percent increase from the second quarter of 2019.

Hain Pure Protein Discontinued Operations

As previously disclosed on May 5, 2018, the results of operations, financial position and cash flows related to the operations of the Hain Pure Protein business segment have been moved to discontinued operations in the current and prior periods. On February 15, 2019, the Company completed the sale of substantially all of the assets used primarily for the Plainville Farms business and on May 8, 2019 the Company entered into a definitive agreement to sell all of its equity interest in Hain Pure Protein Corporation, which includes the FreeBird® and Empire Kosher® businesses. Net sales for Hain Pure Protein in the third quarter were USD 88.7 million, a decrease of 25 percent compared to the prior year period. Net loss from discontinued operations, net of tax in the third quarter was USD 75.9 million and included a USD 40.0 million non-cash impairment charge and a loss on sale of USD 29.7 million.

Fiscal Year 2019 Guidance

The Company reiterates its annual guidance for continuing operations for fiscal year 2019:

Total net sales of USD 2.320 billion to USD 2.350 billion, a decrease of approximately 4 percent to 6 percent as compared to fiscal year 2018.

Adjusted Ebitda of USD 185 million to USD 200 million, a decrease of approximately 22 percent to 28 percent as compared to fiscal year 2018.

Adjusted EPS of USD 0.60 to USD 0.70, a decrease of approximately 40 percent to 48 percent as compared to fiscal year 2018.

Guidance, where adjusted, is provided on a non-GAAP basis and excludes acquisition-related expenses; integration charges; restructuring charges, start-up costs, consulting fees and other costs associated with Project Terra; costs associated with the CEO Succession Agreement; unrealized net foreign currency gains or losses, and accounting review and remediation costs and other non-recurring items that may be incurred during the Company’s fiscal year 2019, which the Company will continue to identify as it reports its future financial results. Guidance also excludes the impact of any future acquisitions and divestitures.

The Company cannot reconcile its expected Adjusted Ebitda to net income or adjusted earnings per diluted share to earnings per diluted share under «Fiscal Year 2019 Guidance» without unreasonable effort because certain items that impact net income and other reconciling metrics are out of the Company’s control and/or cannot be reasonably predicted at this time.

This press release includes certain non-GAAP financial measures, which are intended to supplement, not substitute for, comparable GAAP financial measures.

Unless otherwise noted all results included in this press release are from continuing operations.

Refer to «Net Sales Growth at Constant Currency and Adjusted for Acquisitions, Divestitures and Other» provided herein or on the Company’s web server.